Suncorp Group Limited (ASX: SUN)

Suncorp Group Limited (ASX: SUN) provides insurance and banking products and services through various brands in Australia and New Zealand. Its segments include Insurance (Australia), Suncorp Bank and Suncorp New Zealand.

Recommendation Rationale – SELL at AUD 16.230

• Profit Booking: SUN’s share price surpassed Resistance 1 level recommended on 29 December 2023; and thus, offered a profit booking opportunity.
• Financial Performance: In 1HFY24 ended 31 December 2023, the company registered a 5.4% YoY jump in group net profit after tax. Net investment returns for the period stood at AUD 396mn, up from AUD 167mn in the year-ago period.
• Outlook: SUN expects a low to mid-teens increase in gross written premium for its insurance business in FY24. The underlying insurance trading ratio is anticipated around the midpoint of the 10% to 12% range for the year.
• Key Risks: SUN’s performance is susceptible to regulatory risks, uncertain macroeconomic events, inflationary environment, rising interest rates, among others.
• Overvalued Multiples: On a forward 12-month basis, key valuation multiples, such as EV/EBITDA and Price/Cash Flow are higher than median of the insurance industry.

SUN Daily Chart

Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 16.230, at 12:31 PM AEST, as of 26 April 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 26 April 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.

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